Business

Tax Corner: What businesses need to know about the new plastic packaging tax

What do businesses here need to know about the new plastic packaging tax?
What do businesses here need to know about the new plastic packaging tax? What do businesses here need to know about the new plastic packaging tax?

QUESTION: Our business regularly buys packaging to pack our products before shipping to customers, do we need to be aware of the new plastic packaging tax?

ANSWER: Plastic packaging tax (PPT) applies to those who have manufactured or imported plastic packaging components which contain less than 30 per cent recycled plastic.

I note you do not manufacture your own packaging; however, you need to consider if you import relevant plastic packaging components.

Those that import plastic packaging, whether filled or unfilled with goods, that will not undergo any further modification that changes its nature, will be liable for the tax.

PPT is chargeable when the packaging has cleared all customs procedures.

Perhaps you don’t import your packaging but purchase from UK supplier, you still need to consider whether PPT applies to your business.

Where substantial modifications are carried out to acquired packaging components’ features before the packing or filling process, the business that undertakes this is liable for the tax.

A substantial modification is a manufacturing process that changes the packaging components’ features, i.e. its shape, structure, thickness, weight, etc.

Examples of manufacturing processes which are substantial modification processes include extrusion, forming, layering and laminating, moulding and printing. Simply cutting, labelling and sealing packaging would not be classed as substantial modifications.

Some exemptions from PPT include packaging for human medicine, where its secondary to its storage function (glasses case/toolbox), where it is integral to the good (cartridges, tea bags) and imported transport packaging.

The tax came into force on April 1 2022 and is charged at a rate of £200 per tonne.

The registration threshold for plastic packaging tax is 10 tonnes or more i.e. if you expect to import into UK or manufacturing finished plastic packaging components in the next 30 days alone or have done so in a 12month period (starting April 1 2022).

If you meet the registration threshold you will be required to register for Plastic Packaging Tax using your Government Gateway user ID, keep detailed records and file quarterly returns. The quarterly return periods are:

• April 1 to June 30

• July 1 to September 30

• October 1 to December 31

• January 1 to March 31.

Returns and the tax are due no later than the last ‘working day’ of the month following the end of the period.

Companies have been able to register for the tax since April, and they were then expected to have completed their first quarter report by Friday July 29 2022.

However, fewer than one in twenty liable businesses registered for the new plastic packaging tax in the first month, raising concerns that firms will be hit by fines for non-compliance.

Since PPT only applies to plastic packaging components which contain less than 30 per cent recycled plastic, now could be the time to consider alternative packaging.

Even if you don’t incur the tax, you might notice your supplier increase their prices to cover their added cost. In fact, the measure was introduced in an attempt to encourage firms to use recycled plastic.

KellyAnne Murtagh (k.murtagh@fpmaab.com) is senior manager at FPM Accountants Limited (fpmaab.com). The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies